I am evaluating a 5 single family home package in my local market. The numbers as originally provided looked good enough to push for more information. Not so good at this point but I thought that it might to worthwhile to seek the collective knowledge of this group to seek advice.
So here is the basics:
Asking Price $275,000
Existing assumable loans of 170k at and 67K
All currently rented with Annual of $40500.
Identified total annual expenses of $25,056 including Amortization and taxes etc
Most home have been remodeled recently and rents are low for the area as the owner is out of area and passive.
So my questions are:
1. Nope doesn't make sense.
2. Creative ideas to make it work.
3. Screening criteria for a quick thumbs up or thumbs down?
Appreciate any feedback at this point.
Larry in Dallas
Bearing in mind that I don't do buy and hold at this point and so am no expert, I'd think that if the $25K expenses include things like earmarked repair funds, any utilities paid by owner, etc, and if there are no major repairs upcoming (roofs, HVACs, etc), I'd say it doesn't sound terrible. If the $25K only includes PITI (Principle, Interest, Taxes, Insurance), then probably not so great. I also don't know your market, though. If you haven't done so already, try out the BP Buy and Hold Calculator and see what you come up with. Good luck and let us know how it goes!
What area of Dallas are these in? $55k for a house that rents for $675 (average based on your numbers) tell me these are probably South Dallas or similar C- or D neighborhoods. Not a neighborhood I would buy in, but everyone has their niche. For that kind of property I would certainly expect a better return than this deal presents.
I took the time to use the real estate deal calculator and this is what I came up with:
I plugged in 25k for repairs. 3 units have been recently rehabbed.
I low balled after repair value of $350,000. I will do some comps. myself
Underlying loans $261250
P/I of $1688/mo
Income/Expense ratio is 1%
Debt coverage is 1.54
Annual income $36,900
Annual Expense $25,974
Operating Expense $5715
Cash flow $10,925
Cash on Cash 23.37 %
I am looking for the good bad and the ugly on the deal?
Per door monthly cash flow is $182. I have seen some Investors use $100 a door as a minimum and others use $200.
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